What is a Prenuptial Agreement
A prenuptial agreement is used by a couple who has decided to get married or form a civil union. Further, this agreement states what happens to income, debts, and assets in the event that the couple gets a divorce or one spouse dies. A prenuptial agreement protects both people getting married. Further, this agreement is most commonly used by couples who have significant earnings or assets.
Couples can include clauses in the prenuptial agreement that include stipulations if one partner behaves in a certain way. The most common stipulation focuses on adultery. In this case, the partner who committed adultery may forfeit their protection to property or assets if the couple divorces.
While prenuptial agreements are typically legally binding, there are certain cases in which the agreement does not have to be enforced. The most common reason a prenuptial agreement is voided is if both parties agree to another type of settlement. These additional agreements—while changing the financial aspect of a divorce—do not have to affect the child custody situation or other important aspects of the agreement.
Prenuptial agreements are also commonly referred to as:
- Marriage Contract
- Premarital Agreement
- Antenuptial Agreement
- Domestic Agreement
- Marriage Agreement
- Domestic Contract
- Premarital Contract
Who Should Use a Prenuptial Agreement
Prenuptial agreements help both parties if a divorce were to ever occur. Thus, any couple can use this agreement. However, a prenuptial agreement is especially useful if any of the following situations apply to you:
- A common reason couples use this document is if either or both parties have children from a previous relationship. The reason for this is that in most states if a spouse dies, at least half of their assets will transfer to the surviving spouse unless there is a will or premarital agreement stating otherwise. This could leave your children without a sufficient inheritance or could give the surviving spouse assets that you would rather have gone to children.
- People with significant inheritances, assets, or business holdings that want to keep these assets separate from the relationship will use a prenuptial agreement. When parties divorce, the courts look at creating an equitable distribution of assets. However, the courts will look at the prenuptial agreement to see what assets should be kept out of this equitable distribution.
- A divorce or death of a spouse is one of the most stressful and depressing times a person will encounter during their lifetime. Thus, a prenuptial agreement can make a stressful time easier by having a plan in place.
- If you want to protect your existing retirement account, a prenuptial agreement is a good idea. This is true whether you just started a retirement account or have been saving for twenty years. Without this agreement, the other spouse will likely be able to receive a significant portion of your savings.
- The final common reason for this document is if the two parties earn a significantly different amount of money. In this case, a prenuptial agreement can protect assets while also agreeing on an appropriate support system.
Difference Between Separate and Shared Property
As couples often use prenuptial agreements to specify what pieces of property will go to each spouse in the event of a divorce, it is important to understand the difference between separate and shared property.
A prenup agreement allows you to designate certain assets as separate. Items under this designation belong fully and solely to one spouse. Thus, if a divorce occurs, the owner of the separate property continues to own that property. Further, the sole owner of the property can do whatever they want with the property. Separate property could be any property or assets you acquired before you marry your spouse.
Shared property refers to assets that you and your spouse acquired while you were married. Additionally, even if the title to the property is only in one person’s name, the property may be considered shared property. If a divorce occurs, the value of the property is split in half for each spouse. However, instead of selling the property, one spouse may buy out the other’s share in the property.
Pros and Cons of Prenups
There are many pros and cons to prenuptial agreements. However, the most common pros and cons include:
- One of the main benefits of signing a prenuptial agreement is that the document can address any financial concerns you may have. A prenuptial agreement will explicitly explain how a couple will handle finances and also state financial compensation for a spouse if separation occurs.
- A prenuptial agreement can also protect a spouse from the other’s debts. This allows each spouse to take on material debts and keep their financial obligations separate.
- This agreement can also protect your personal property rights including retirement accounts, real estate, business interests, bank accounts, investment accounts, and personal property.
- Another pro to prenuptial agreements is that you can outline what assets children from previous marriages inherit in the event you pass away.
- Finally, prenuptial agreements can reduce the cost and time it takes to finalize the divorce. By laying out how the process will go, a prenuptial agreement will reduce the time it takes to move through the divorce, thus, lowering the cost.
Downsides to prenuptial agreements include:
- The first downside to a prenuptial agreement is that you may not receive part of your spouse’s assets in the event of divorce. Further, though you may receive some of their assets, it may not equal the amount you desire.
- You may not be able to retain an ownership share in a business you partially ran. For example, maybe you brought in a few clients or improved certain business processes. Additionally, maybe your contribution was to stay at home with children so your spouse could focus on their career. No matter your role, a prenuptial agreement may make it more difficult for you to receive your fair share of the company.
- Your state may not enforce this agreement.
Because prenuptial agreements cover very important aspects of a marriage, it is imperative to make sure this document is legal. For a prenuptial agreement to be valid, the agreement must include:
- Be signed by both parties of their own free will. They cannot be under duress or be pressured into signing the prenup.
- Be fair and reasonable.
- Signed by both parties before a witness and a notary.
- Be presented with full disclosure.
Can You Void a Prenuptial Agreement
You can void a prenuptial agreement. For example, if your agreement does not comply with state governing laws, it will be void. Further, the document is void if it does not follow each of the legal considerations.
Further, prenuptial agreements must be fair in the eyes of the court. If a couple does not create a balanced document, the court may not accept the agreement. To decide if the document is fair, the courts will look at each spouses earning potential and ability to support themselves. Finally, the court will look at each spouses situation when entering the agreement including the amount of property each spouse owns, the income of each spouse, family obligations, earning capacity for each spouse, the future needs of each spouse, the occupation of both parties, the expected contribution to the relationship, and the age and health (both physical and mental) of each party.
Can You Sign a Prenup After the Wedding
You can sign a postnuptial agreement after the wedding, however, this agreement is not as enforceable as a prenuptial agreement.
Contact Our DC Law Office for More Information
Finally, for more information regarding what is a prenuptial agreement, contact us at 202-803-5676. You can also directly schedule a consultation with one of our skilled attorneys. Additionally, for general information regarding family law, check out our blog.